The purpose of this handout is to assist you in answering questions
that you may have regarding separation agreements. It is, of course, impossible
to answer all of your questions in a short brochure such as this, so we want
to encourage you to ask other questions of your lawyer at the appropriate
time. Feel free to take this handout with you so that you may refer to these
answers from time to time and have a better idea of how your case is being
handled.

1.

Q.

Do I have to have a separation agreement?

A.

No law requires a separating couple to execute a separation agreement,
but it is a wise idea if there are debts, children, support claims or property
involved and the parties want to settle these matters in writing. Oral
promises between spouses are worthless and unenforceable.

2.

Q.

What is a separation agreement?

A.

A separation agreement is a contract between a husband and wife in which
they resolve such matters as property division, debts, custody and support
when they separate from each other.

3.

Q.

Who prepares a separation agreement?

A.

It is best to have your own attorney prepare it for you. The separation
agreement is not valid in North Carolina unless both parties have signed
and their signatures are notarized. Never try to prepare such a complex and
important document yourself - this is a job for a specialist.

4.

Q.

Can we divide our property in a separation agreement?

A.

Yes. A couple that is separating can agree on a division of property
in their separation agreement, and that agreement will be binding on them.
The property to be divided consists of real property (such as land and the
buildings on it), tangible property (cars, jewelry and furniture for example)
and intangible personal property (such as bank accounts, stocks and bonds,
vested pensions and life insurance).

5.

Q.

Is my spouse required to sign a separation agreement?

A.

No. "Agreement" means that both parties sign voluntarily. You cannot
compel your spouse to sign a separation agreement or to agree to the terms
you wish to impose on him or her in the agreement.

6.

Q.

Does a separation agreement help me to get a divorce?

A.

A separation agreement is not "proof" that you have been living separate
and apart from your spouse. It does not make divorce in North Carolina easier
or more difficult to obtain.

7.

Q.

Can our separation agreement settle who claims the tax exemption
for our children?

A.

Yes. The 1984 Tax Reform Act allows the parties to agree as to who can
claim the children as exemptions for income tax purposes. Without a written
agreement, the parent who has physical custody of the child for more than
half the year will get the dependency exemption.

8.

Q.

What are the factors I should consider in transferring the
exemption?

A.

Consider these issues:

Should the dependency exemption be traded, instead of given, to the noncustodial
parent in exchange for an increase in child support? Even a small increase
in child support would help offset the tax increase paid by the custodial
parent, and the other parent can better afford such an increase due to the
taxes he or she saves by claiming the exemption on federal and state tax
returns.

Should you alternate the tax exemption between parents? For example, the
father could claim the exemption in even-numbered years (1996, 1998, and
so on) and the mother could do so in odd- numbered years. Or the father could
claim one child and the mother could claim the other. Such alternation would
lessen the impact of higher taxes on the custodial parent.

Should you condition the transfer on the noncustodial parent's regular and
full payment of child support? Instead of transferring the exemption permanently
without regard to payment of child support on time, some custodial parents
agree to transfer of the dependency exemption only if the other parent is
current (not in arrears) on child support payments by December 31 of each
year.

9.

Q.

Can I get my husband for contempt of court if he breaks the
promises in the separation agreement?

A.

No. Contempt of court is the failure to obey a court order without legal
justification. It is not contempt of court to violate a separation agreement
unless the agreement has been made a part of a court order. You may, however,
sue your spouse for breach of contract if he or she violates the separation
agreement.

10.

Q.

Will a separation agreement free me from paying debts
for which I have signed along with my spouse?

A.

No. A separation agreement is a contract between spouses. It cannot bind
third parties (such as banks or finance companies) that have not signed it.
If, however, one spouse promises to pay a bill and then breaks that promise
resulting in your having to pay, you can sue your spouse for breach of contract
for the amount of money you had to pay.

11.

Q.

Will a separation agreement stop my spouse from hassling
me?

A.

While separation agreements usually have a nonharrassment clause in them,
you should understand that no piece of paper - be it agreement or court order
- is going to stop a person from doing something he or she wants to do. If
the problem is one of physical violence, a court order would be better than
a separation agreement and could be used to punish the wrongdoer if he or
she violated the order. If there is only an agreement, a lawsuit for breach
of contract is one possible remedy for breaking the promise of not hassling
each other.

12.

Q.

Is a court bound by what we put in the separation agreement
about our children?

A.

No. The terms you include for child support, custody and visitation can
always be modified by the court in the best interest of the children. In
the absence of proof to the contrary, however, there is a presumption that
the terms concerning the children in your agreement are fair, reasonable
and necessary for the best interest and welfare of the children.

13.

Q.

Can the court modify the terms we include in a separation agreement
concerning ourselves?

A.

Unlike the terms concerning children, which are always modifiable by
the court, the terms that pertain to adults cannot be modified by the court
except in very limited circumstances. For example, if the separation agreement
has been incorporated into a court decree, then the court has the power in
North Carolina to modify the alimony terms based
on a substantial change of circumstances. If the terms involve property division
and the agreement has been incorporated, the court can only modify it if
it is executory in nature (i.e., it has not yet been completed, such as the
transfer next year of a car title to a spouse), as opposed to those items
which are already executed by the parties (such as the deed to the house
that was signed over to a spouse at the same time as the separation agreement
was signed). The court can overturn a separation agreement if it was signed
due to fraud, coercion, ignorance or lack of mental capacity. In most cases,
however, this is difficult to prove.

14.

Q.

Can we provide for college education for our children in a separation
agreement?

A.

Although a North Carolina judge cannot order you to pay child support
for your child in college, you may make provision for college expenses in
a separation agreement and it will become a binding, enforceable contract
which the court can require each of you to perform. Since college is less
of a luxury and more of a necessity these days, it would be a good idea to
consider whether you want to provide in writing for your child's/children's
college education.

15.

Q.

What points should we remember in deciding about college
expenses?

A.

Here are some of the items that a good separation agreement will address:

How long should the obligation last? 4 years? 4 1/2 years? Until the child
attains age 23? Some ending point should be set.

What costs will be covered? The usual ones are room and board, books, tuition
and fees. Some parents also agree on a monthly allowance for spending money
for the child.

What are the spending limits? Few parents want to agree to finance a college
education for a child at any college or university. The cost of some private
colleges and universities would bankrupt the average parent. It is reasonable
to put a ceiling or "cap" on the college expenses, such as by specifying
that the maximum shall be "the then-prevailing rate at N.C. State University"
or some other nearby public institution. Such a provision is fair to everyone
and does not force either parent to go broke paying for college.

What other limits do you want to set? For example, some agreements require
that the child will be--

attending an accredited institution

in pursuit of a generally recognized undergraduate degree

on a full-time basis

while maintaining at least a "C" average.

How much should you pay? Be sure to set a specific amount or percentage for
yourself and your spouse; don't just say, "a reasonable share." Should it
be 50%? 2/3 of the cost? Be sure to spell it out specifically!

16.

Q.

Should we provide for alimony in our separation agreement?

A.

Alimony is spousal support - it is money paid by one spouse to the other
to help with support, maintenance and living expenses. It is not the same
thing as child support. If the two of you have agreed on an amount of alimony,
you should definitely put that in the separation agreement. Such a provision
might state, for example, that the husband shall pay the wife alimony of
$1500 per month until he or she dies or until she remarries, or it could
state that the wife shall pay the husband alimony of $900 per month for a
total of 60 months, at which time it will terminate forever. These are just
examples - your attorney will advise you about the applicability of alimony
in your particular case.

17.

Q.

Is alimony tax-deductible?

A.

If the agreement is drafted properly, the alimony can be made to be
deductible for the payor and therefore taxable to the payee. It is also
acceptable to make the alimony nontaxable to the payee if it is nondeductible
for the payor. This is a particularly important term and it should be spelled
out clearly in the agreement how the alimony payments will be treated for
tax purposes.

18.

Q.

When does alimony end?

A.

The usual times alimony ends are at the death of the husband, the death
of the wife or the remarriage of the recipient, or upon the recipient's
cohabitation (i.e., living with
an unrelated person of the opposite sex on a regular basis as if they were
husband and wife). Some clients specify that alimony will end on a particular
date or after a specified period of months or years. It is very
important that your agreement set out specifically all of the
terminating events for alimony that should apply.

19.

Q.

What should we do if we have agreed that no alimony will be
paid?

A.

It is always best to put such a term in the agreement. Don't just leave
it out or let the agreement be silent on this issue. This waiver of alimony
is such an important term that it should be clearly spelled out in the agreement
so that there is no misunderstanding.

20.

Q.

How do I know if I am entitled to alimony?

A.

Your attorney who prepares the separation agreement will explain alimony
to you. In North Carolina, alimony may be granted by the court if:

You file a lawsuit requesting alimony;

You are financially dependent on the other party or in need of support from
him/her;

The other spouse is the supporting spouse, that is, he or she is able to
provide reasonable spousal support to you; and

An award of alimony is equitable (or "fair") under all the circumstances.

An absolute defense to an alimony case exists when the parties have waived
alimony in a separation agreement, when a divorce has been granted before
an alimony claim is asserted in court, or when the dependent spouse has committed
adultery or some other form of illicit sexual behavior.

21.

Q.

How much alimony should I get?

A.

This question is impossible to answer. There are no guidelines for alimony
in North Carolina, so there is no way of predicting what the court would
have done to set an alimony award if the case had gone to court. Alimony
awards of $500-1000 per month are not uncommon, and some spouses who make
a great deal of money could pay as much as $4,000 per month or more in alimony.
The best way to figure how much alimony a client needs is to calculate the
difference between her reasonable monthly needs and her current net income, and
then to compare this figure to the difference between the other party's net income
and reasonable monthly expenses. Your gap is "unmet needs" and should
be equivalent (under ideal circumstances) to the "extra" money he has left
over from his paycheck after he pays for his own reasonable monthly expenses.
Since these "gaps" seldom exist in reality and everyone is usually spending
a lot more than he or she is making, it is often a question of haggling,
discussion, bargaining and horse-trading as to how much alimony should be
paid in any individual case. For a more detailed discussion of alimony, see
our Client Information Letter on this subject.

22.

Q.

How should we divide our property in the separation
agreement?

A.

In North Carolina, there is a strong presumption that all property acquired
during the marriage is divided on a 50-50 or equal basis. This is presumed
to be fair. Other divisions, such as 60-40 or 75-25 are certainly legal if
the parties agree that the division is fair and equitable. And on rare
occasions they are granted in court after a long and contested trial.
In North Carolina, marital property, with certain
exceptions, is anything acquired during the marriage. The exceptions
are separate property, that is, property acquired by either party before
their marriage or property acquired at anytime by give (from someone
other than the spouse) or inheritance. The title to
the property -- that is, whose name is on the deed or title -- is not the
deciding factor in determining what is separate and what is marital
property. Rather, when the asset was acquired (i.e., before or
during marriage) and how it was acquired (i.e., by use of marital funds
or separate funds, by gift or inheritances, etc.) is the important
consideration.

23.

Q.

What about the increase in marital
property after the separation -- can that be divided?

A.

It depends. The "passive" appreciation
or depreciation, such as market growth or loss, is a kind of property
called "divisible property" that should be divided between the
spouses. For example, if your money market account has earned
interest or your house has increased in value simply due to the market
and not because of the active efforts of either spouse since the
separation, that passive change in value should be divided along with
the marital property.

24.

Q.

What about pensions and retirement benefits -- are they
divisible?

A.

Pensions and retirement rights acquired during the
marriage are marital property even if they are not vested. This type of property is often very valuable.
Often, a spouse's pension rights is the most valuable
asset of the entire marriage, and this should certainly be considered when
doing a separation agreement. If there is to be no division, the agreement
should so specify. If the decision on pension division is to be put off or
deferred because there is no present agreement, that also should be stated
clearly. Make sure your agreement is very specific and plain in this area
as to your intent on dividing the pension -- a poorly worded agreement may
be challenged as vague and unenforceable. The division of pension rights
in a separation agreement can be done in two ways: a present-value offset,
or a future percentage of payments. The former of these involves calculating
the present value of the pension right now and setting it off (or trading
it) against the value of another item, such as the other spouse's pension
or the marital residence. The second of these approaches would postpone the
division until whenever the employed spouse starts receiving the pension
payments, at which time the nonpensioned spouse would receive a share of
each check equal to one-half (or some other portion) of the portion acquired
during the marriage. Most pension or retirement benefits require a
court order, such as a Qualified Domestic Relations Order, to
divide. This order can often be entered by consent. The
division of retirement benefits can be complicated and your attorney can
assist you with how to properly divide the benefits in your case.

25.

Q.

Do we also divide our debts in the agreement?

A.

You should set out a list of who pays what debt in your separation agreement,
including the creditor's name, account number, purpose of the debt, approximate
balance and monthly payment amount. This will not stop the creditor from
suing both of you if payments are not made by a spouse and both of your names
are on the obligation, but it allows you to ask the court to hold your spouse
accountable and to reimburse you for any payments you have had to make for the debt
distributed to your spouse in the agreement.

26.

Q.

How should we divide our debts?

A.

There is no "right" answer to this question. In one case, the husband
may take on payment for all the debts because his is the sole source of income
in the family or because he created the debts in the first place. In another
case, the wife may take over certain debt payments for things she charged
or purchased or for things that she is being given in the property division.
For example, if the husband is getting the station wagon and the wife is
getting the washer and dryer, they might decide that each should assume the
debt payment for the items he or she is receiving. It is often wise to
have the spouse with the greatest incentive for making sure the debt is
paid be responsible for that debt. For example, the spouse driving
a particular car would want to make sure the car loan for that car is
paid promptly so the car does not get repossessed. Therefore, it
makes sense for that spouse to have the responsibility for that debt in
the separation agreement.

27.

Q.

I want to make sure I can "date" after we get the separation agreement
signed. Can I have my attorney put in a "dating clause"?

A.

It all depends on what you mean. If you mean the freedom to associate
with anyone you wish to see, then it will be covered in the standard language
found in your agreement. Most separation agreements contain a clause that
allows each spouse to be left alone as if single and unmarried and forbids
each spouse from harassing, molesting or interfering with the other. But
if you mean sexual relations with another before you're divorced, don't even
think about it! There is no such thing as a separation agreement "dating
clause" that allows adultery. Any sexual relations with a person who is not
your spouse is adultery in the eyes of the law,
regardless of the words in a separation agreement. There can be serious
criminal and civil consequences for these, and no "dating clause" will
serve to make legal something that is illegal. It is best not to take
any chances and refrain from sexual relations until after the divorce is
final.

28.

Q.

Should we also provide for how we file for taxes in the
agreement?

A.

Yes. This is a very important provision which can save you and your spouse
a lot of money in taxes if prepared properly. A good example would be a clause
that required the parties to file jointly so long as they are eligible to
do so (which is up until the year they are divorced) and to divide the refund
or liability for taxes in a specified way, such as 50-50, or 75-25, depending
on the incomes of the parties.

29.

Q.

Can a single attorney do the separation agreement for me and my
spouse?

A.

It is best to have two attorneys involved, one to advise each
spouse.
In this way, the husband and the wife both know that they have received
independent legal advice for their individual situations from lawyers who
do not have a conflict of interest in trying to represent two clients with
different goals and needs. The attorneys in our office will only
prepare a separation agreement on behalf of one spouse and not for both
parties.

29.

Q.

What if I have other questions?

A.

Please ask us. We're here to help you. If a question comes up in between
office visits, just call us and we'll try to answer it for you.

Comments, suggestions or questions are always welcome. Is there
some way we can improve this handout? Are there questions that you have which
are unanswered? Please let us know -- we're here to help you.